After the stock market fell sharply in 2022, January brought a serious backlash to investors.
The S&P 500 is up 6% year-to-date, and the Dow Jones Industrial Average is up about 1.8%. The hardest-hit tech stock, the Nasdaq, which fell about 30% in 2022, finished the month up more than 11%.
But will the rally continue? Here’s what history tells us about market trends in February.
What the data show
A recent analysis by Bespoke Investment Group shows that historically, stock markets tend to rise in the first half of February and fall in the second half. On average, profits tend to be slightly larger than losses.
- From 1985 to 2022, the S&P 500 gained 0.37% in February.
- Over the past decade, that profit has risen to 0.43%.
According to Bespoke, years when the market is strong in January tend to result in lower losses in the second half of February.
Brad McMillan, chief investment officer at Commonwealth Financial Network, said this bodes well for the stock market next month.
- McMillan points to the fact that the key risks to the market that have plagued investors – high interest rates, possible defaults and a recession – are likely to ease this year.
- In a recent blog post, McMillan wrote, “Six months from now, we will be much better off in most respects than we are now, giving the market a boost towards the end of the year.”
No one has a crystal ball when it comes to the stock market. If you are investing for the long term, financial experts generally recommend creating and maintaining a plan that aligns with your goals and risk tolerance, regardless of month-to-month fluctuations in the market.
Details from money:
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